In late 2017 Congress passed a major tax bill called the TCJA, which resulted in lower total Federal income taxes for many Americans. Most Americans pay their Federal income tax through withholding taxes taken out of your check every pay period, and at the end of the year many people find that they have overpaid and receive a nice Federal tax refund.
The law change this year will result in less total tax, but the way it is structured most people will see less tax withheld every pay period rather than through a refund check at the end of the year. We are quite concerned about this effect and the surprise you may see at tax filing time next spring. Without a review of your tax situation, you may go from a history of receiving refund checks to a balance due to the government at tax time. The good news is that we still have time to change the year-end result if we act soon.
We, very strongly suggest that every client with withholding, whether from a W-2 job, retirement or Social Security use the new IRS Withholding Calculator to perform a quick “paycheck checkup.” The Calculator helps you identify your tax withholding to make sure you have the right amount of tax withheld from your paycheck at work.
There are several reasons to check your withholding:
If you are an employee, the Withholding Calculator helps you determine whether you need to give your employer a new Form W-4, Employee's Withholding Allowance Certificate.
You can use your results from the Calculator to help fill out the form and adjust your income tax withholding.
IMPORTANT NOTE: This Withholding Calculator works for most taxpayers. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax. This includes taxpayers who owe self-employment tax, alternative minimum tax, the tax on unearned income of dependents or certain other taxes, and people with long-term capital gains or qualified dividends.
Here is the link to the Calculator: https://apps.irs.gov/app/withholdingcalculator/
To Change Your Withholding:
Special Note for 2019: If you follow the recommendations at the end of this Calculator and change your withholding for 2018, the IRS reminds you to be sure to recheck your withholding at the start of 2019. This is especially important if you reduce your withholding sometime during 2018. A mid-year withholding change in 2018 may have a different full-year impact in 2019. So if you do not file a new Form W-4 for 2019, your withholding might be higher or lower than you intend. To help protect against having too little withheld in 2019, we encourage checking your withholding again early in 2019.
If you have additional questions about your withholding, consult please give us a call.
Keeping up with optometry chains and online retailers is one of the biggest challenges that independent eyecare practices face in the optometry field today.
Keeping track of your finances gives a general overview of where your business is at and can provide a guide for what changes may need to be made.
At Caro & Associates, we recognize the challenges that come along with expanding your practice, and we offer services like optometry accounting specifically for optometry practices to help you navigate tough business decisions.